A CONVERSATION WITH THE DELAWARE ASSISTANT SECRETARY OF STATE

Caroline Quigley, one of the principals of Inc. Plan (USA), conducted an in-depth interview with Lawrence E. Windley, the Assistant Secretary of State for the State of Delaware, to explore what Delaware is doing to retain its status as one of the premier states in which businesses incorporate. During the interview, Windley discussed Delaware’s commitment to its customers and how it stays at the forefront of incorporating by continually improving services and technology to meet the needs of diverse businesses from around the world.

Why do so many businesses incorporate in Delaware versus other states?

Lawrence Windley: I think the important thing is that we try to provide an atmosphere that facilitates business. I can talk about any of the individual things Delaware offers like the legal system, the fact that the taxes and fees are reasonable for the value you get and the excellent service, but it’s the combination of all of them that makes it a pro-business environment. This is true for any company from a small entrepreneurial business to a Fortune 500 enterprise.

Are there any other reasons for a company to incorporate in Delaware?

Lawrence Windley: Well, this may be more applicable to larger companies, but one very distinctive feature about Delaware is its very good legal and court system. Delaware has a long history of being fair to corporations. There are several other things that businesses find attractive. They include:

Protection of personal assets.

Possibility of tax savings.

Annual meetings of Delaware corporations may be held outside the state of Delaware.

A Delaware corporation may keep all of its books and records outside the state of Delaware.

There is no Delaware tax on non-resident stockholders who do no do business in Delaware.

In most cases, Delaware has no sales, personal property or intangible property tax on corporations that do not do business in Delaware.

Indemnification an personal liability protection of the directors and officers of corporations is permitted.

Would you say there are any misconceptions about Delaware?

Lawrence Windley: Some people might have this idea of Delaware as a kind of tax haven. That’s not true. Delaware’s laws were put into place because the legislature and others in Delaware saw that the conduct of legitimate business was impeded by a number of obstacles. They perceived that if they changed the law a certain way, it could be both fair to the shareholders but also enable the business to profit. That’s why these laws were instituted. We want people to know that Delaware is the preeminent to be incorporated because, among other things, the quality of its services and the reasonableness of its fees.

You mentioned the reasonableness of the fees. How are the fees determined?

Lawrence Windley: Companies have a choice. For most, it is based solely on the number of shares the company has and has nothing to do with income or net worth. However, about 7,000 companies do file by the alternative method which is determined on the basis of issued shares and assets.

You briefly noted that you are installing some new technology. How will the technology help?

Lawrence Windley: We just spent $1.5 million to upgrade our computer systems so that we can offer extremely fast turnaround to our customers. I don’t think any other state has online access and the capability to the degree we do. AS for our next step, we will integrate even more improvements since we will be able to offer a highly sophisticated website with hyperlinks directly to the agent community. We’re so far on the cutting edge, it’s amazing. In fact, we get a lot of inquiries from companies and other countries who want to see how we run our computer technology.

Are there any other services that people might like to know about?

Lawrence Windley: With our technology, a good part of our business is really information services. Once somebody incorporates here, we become a depository of that company’s information. So we can provide documents and copies for a reasonable fee.
We also have expedited services. If, for example, you need a very quick turnaround, we can provide 2 hour service for an additional fee.

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About the Author

Jacques Luben is a graduate of the University of Pennsylvania and holds an MBA degree from Columbia University. He has occupied management positions at Merrill Lynch and Morgan Stanley in New York City. In addition, for 15 years, he served as the Executive Director of Platinum Guild International (USA), a leading mining trade association with offices in six countries.